Production & Operations Management (MB0028) - Set 1

Q.1. Explain what is meant by capital productivity?

Ans. Capital Productivity: Capital deployed in plant, machinery, buildings and the
distribution systems as well as working capital are components of the cost of manufacture
and need to be productive. Demand fluctuations, uncertainties of production owing to
breakdowns and inventories being created drag the productivity down. Therefore, strategies
are needed to maximize the utilization of the funds allotted towards capital.

Outsourcing Strategies: When capacity requirements are determined it will be easy to

determine whether some goods or services can be outsourced so that the capital and
manpower requirements can be reduced and the available capacities are used to augment
core competencies. However, the following factors may restrict outsourcing.
a) Lack of expertise – the outsourced firm may not have the requisite expertise to do the
job required.
b) Quality considerations Loss of control over operations may result in lower quality.
c) Nature of demand – When the load is uniform and steady, it may not be worthwhile to
out sourcing. Absence of supervision and control may be a hindrance to meet any
urgent requirements of the customer. This affects the business especially if no
production facilities are built in the organization.
d) Cost when the fixed costs that goes along with making the product does not get
reduced considerably.

Methods Improvement: This starts with Methods analysis. Focus of this process is how a
job is done breaking it down to elemental tasks so that they are amenable for analysis. This
is done for both running jobs and new jobs. For a new job, the description becomes the
input for analysis. For current jobs, the analyst depends on observations, records and
suggestions of the persons involved in the job. When improved methods are suggested,
they are implemented and records created for assessing the consequences of the methods
improvement procedures. The analyst should involve all concerned persons in the process
so that acceptance becomes possible and opportunities open up for further improvements.

Balancing of Workstations: Assembly lines necessitate out stringing together

workstations which carry out operations in a sequence so that the product gets completed in
stages. Since the workflow has to be uniform and operations may require different periods
for completion the necessity of Line Balancing is felt.

Rationalization of Packaging Methods: With logistics becoming an important function of

the supply chain and outsourcing becoming the norm, packaging has become an important
aspect, packaging has become important. Space is at a premium and therefore stacking and
storing have to more scientific. Movements inside the premises from one location to another
location are being done with automated systems and they need that the packaging systems
are designed for safe transit, continuous monitoring – both for quantities and operations.

Quality Circles: The causes for the existence of a problem are classified as pertaining to
the material, processes or method or any factor that goes into production. The matter is
further investigated and pursued till the exact cause is determined. Quality circles use these
principles in solving problems. The teams select projects selected on the above basis and
implement actions to achieve improvement in the processes with a view to improve quality.
Since these activities are carried out without affecting the regular day to day work and
involve little involvement of the managers, team work gets reinforced and results in
continuous improvement in methods and quality. The capital deployed is minimal, if at all
and therefore productivity is enhanced.
Q.2. Write a detailed note on Split case order fulfillment methods and
mechanization.
Ans. Split case Order Fulfillment Methods and Mechanization: This system looks at
situations when bulk supplies in full cases to one or more destinations are not done.
Fulfillment of orders which need different merchandise in different quantities requires that
‘cases’ will have to be split, and pieces picked, repacked in cartons and ship to the
customer. Mechanization helps in improving identification, pickup and repacking the
materials in addition to relieving monotony of the workers. A few strategies of achieving this
objective optimally are discussed here.
Order Picking Methods: Items as per customer requirements have to be picked and
packed in a logical manner and assigned to personnel so that their productivity is
maximized. Accuracy of fulfillment of order is ensured by two basic factors.
a) Order Extent - It is defined as the number of order to be picked simultaneously by a
picker in an assignment. This is categorized as discrete order picking in which case a single
order is selected at a time, and Batch order Picking in which case the merchandise
requirements of many orders are put together and selected for pick up in the geographical
area which is covered in a single pass.
b) Coverage Extent – It is the physical area to be traversed by the picker in selecting
merchandise for an assignment within the picking system. The personnel pick up the
merchandise from a zone the zone being a contiguous area with different picking locations.
The boundaries may be fixed or dynamically adjusted to accommodate either personnel or
customers. In the other method called tour picking the entire picking area is considered for
picking merchandise.

Sorting and Routing: Sorting is done for the purpose of easing the operation of matching
orders, merchandise and the customers for whom they are done. This activity can be done
as and when orders are picked Sort Immediate or by merging a number of order and
batches are made to consolidate the priorities for execution. This method is called Merge
and Sort. The strategy used depends on the total area of the zone, the number of orders,
and the type of merchandise, and the economics of balancing all the above.

Order Packing Methods: Order fulfilling methodology covers one more aspect i.e. the
order packing methods. When split case is executed it becomes necessary that the
merchandise is repackaged for shipment to meet the requirements of the customers. In the
first method they are packed as they are picked.

Classification Schemes: In this coding of various methods of split picking and packing is
done. The letters will uniquely identify the method intended to be used and all personnel in
the process will know disposition status of the merchandise. For ex.
D iscrete Order Picking or Batch Order Picking – Letter D or B is used
Z one Picking or Tour Picking

Q.3. Explain strategic management process & strategic decision making in detail.
Ans. Strategic Management Process: Most of organizational processes depend upon the
structure of the organization, the hierarchical levels, decision arrival mechanisms,
communication systems, authorization processes, implementation procedures, feedback and
monitoring devices to formulate and implement strategies. It is necessary to ensure that the
process is effective and efficient and avoid loss of control. Organizational goals necessitate
the adoption of certain strategies, which are converted to functional goals in the areas of
finance, marketing and operations. These goals are achieved by adopting strategies arrived
at using organizational processes. When these long term strategies are being implemented
to meet short term challenges depending upon situations. The actual activities which results
in outcomes are called a business strategy is the result of a decision taken at the highest
level. They are specific Programme of action which outline how the resources are deployed
to achieve goals in an environment. A general framework to guide and activate think tanks
in the organization to come up with proposals. Action plans with time frames, authority
hierarchies and feedback mechanisms are formulated and designed. At this stage detailed
scenarios as to the likely consequences are considered and contingency plans worked out
for implementation, if situations call for the same.

Strategic Decision Making: Decision making is the most crucial management function.
Decisions commit the organization and its members to activities which have financial
repercussions and affect the functioning of others who are connected with those. Therefore
decisions are taken after lot of deliberations which involve data gathering, analysis and
predicting outcomes. Accuracy of data, their relevance for the matter under consideration is
matters which affect the quality of decisions. In addition, the following factors also form the
basis of decision making:
a) Environmental Scanning - The business environment in which the firm exists and has
to compete continually exhibits potential for opportunities and threats. Becoming aware of
those and their impact on the firm by a process of analysis is called environmental scanning.
The environment includes the industry, the marketplace, the governmental agencies,
society, ecology, technology, etc. Competitors may be gaining edge by diversification,
making forays into the firm’s niche market by making new and better products. Adaptation
to these dynamic factors by environment scanning and basic strategic decisions is vital.
b) Core Competencies: Each organization is started by an entrepreneur or a small group
of them who believed in some unique strength which would give them a place in the
market. Utilizing those strengths the venture would have succeeded and development and
expansion take place either laterally or vertically or in both ways. Core processes of an
organization are determined by the core competencies. Four main core processes are –
customer relationship, new product/service development, supplier relationship and order
fulfillment. One should remember that the environment, is always dynamic and the strategy
formulation needs to be constantly updated for making implementation effective. Ultimately
every organization depends on the core compete cities which gives it an advantage over the
competitors.

Q.4. What is TQM? Explain Quality approaches of Deming Wheel and Jurans Quality
Triology.
Ans. TQM is viewed from many angles - as a philosophy, as an approach and journey
towards excellence. The main thrust is to achieve customer satisfaction by involving
everybody in the organization - across all functions - with continuous improvement driving
all activities. TQM systems are designed to prevent poor quality from occurring. The
following steps are implemented to achieve Total Quality.
a) Take all measures to know what the customer wants. Develop methods that generate
facts which can be used for decision making. Do not ignore the internal customer – the next
person in the process.
b) Convert the wants into design specifications that meet or exceed customer expectations.
c) Processes are to be designed so that they facilitate doing the job right the first time.
d) Keeping record of all occurrences, procedures followed and consequences. They help in
validating the processes so that continuous improvement becomes possible. More
importantly any gaps can be seen and rectified immediately.
One of the basic tenets of TQM - is just because something is working well improvement is
not necessary. The search must be continuous to find ways and means to improve every
aspect of the business process – finance, operations and management. Complacency should
never be allowed to creep in at any time. All these require top management commitment.
Approaches to TQM – Being practiced worldwide by different organizations, TQM has
different approaches towards its achievement. The basic thrust of each of these is realizing
excellence. Each organization will use any of these or even a combination to suit its
structure, culture and need. Some emphasize on the philosophy of TQM and the role of
management and employees in being aware, committed and act. Some expect us to use
statistics more intensely. Some give us an ‘integrated approach’.

Deming Wheel - Deming’s approach is summarized in his 14 points.

1. Constancy of purpose for continuous improvement
2. Adopt the TQM philosophy for economic purposes
3. Do not depend on inspection to deliver quality
4. Do not award any business based on price alone
5. Improve the system of production and service constantly
6. Conduct meaningful training on the job
7. Adopt modern methods of supervision and leadership
8. Remove fear from the minds of everyone connected with the organization
9. Remove barriers between departments and people
10. Do not exhort, repeat slogans and put up posters.
11. Do not set up numerical quotas and work standards
12. Give pride of workmanship to the workmen
13. Education and training to be given vigorously
14. State and exhibit top management’s commitment for quality and productivity
Using the above principles, Deming gave a four step approach to ensure a purposeful
journey of TQM.
a) Plan – means that a problem is identified, processes are determined and relevant
theories are checked out.
b) Do – means that the plan is implemented on a trial basis. All inputs are correctly
measured and recorded.
c) Check – means that the trials taken according to the plan are in accordance with the
expected results.
d) Act - When all the above steps are satisfactory regular production is started so that
quality outcomes are assured

Juran’s Quality Triology - Juran uses his famous Universal Breakthrough Sequence to
implement quality programmes. They are
A – Proof of need - there should be a compelling need to make changes
B – Project Identification - Here what is to be changed is identified Specific projects with
time frames and the resource allocation are decided.
C – Organization with top management’s commitment is made in terms of assignment of
persons, responsibilities fixed
D – Diagnostic journey - each team will determine the problems result from systemic
causes or random or deliberately caused. Root causes are ascertained with utmost
certainty.
E - Remedial Action – This is the stage when changes are introduced. Inspection, testing
and validation are also included at this point.
F – Holding on to the gains - the above steps result in beneficiary results. Having records or
all actions and consequences will help in further improvements. The actions that resulted in
the benefits derived should be the norm for establishing standards.

Juran has categorized cost of quality into four categories.

(a) Failure costs – Internal these are costs of rejections, repairs etc in terms of materials,
labour, machine time and loss of morale;
(b) Failure costs – External – These are costs of replacement, onsite rework including spare
parts and expenses of the personnel, warranty costs and loss of goodwill;
(c) Appraisal Costs - of inspection, including maintenance of records, certification,
segregation costs, etc.
(d) Prevention costs –
The sequence of three sets of activities Quality Planning, Quality Control and Quality
Improvement form the trilogy to achieve Total Quality Management.

His arguments are that

1. Quality is the result of good planning considering the needs of both internal and external
customers and develops processes to meet them.
2. Quality is built into the system of manufacture inputs and processes that are on stream
like raw material, spare parts, labour, machine maintenance, training, warehousing,
inspection procedures, packaging, etc. They have to be made to follow standards and
control exercised to make sure that mistakes do not occur often and if they are they are
corrected at the source.
3. Quality Improvement measures are essential to keep the quality culture alive. Newer
methods will be found, some operations can be eliminated, improved technology available
In short, as experience is gained things can always be done better. It is for the
management to take the initiative and encourage the employees to be on the look out for
opportunities for improvement.

Q.5. Compare Workflow with BPM. Explain in detail the Project Development
process Cycle?
Ans. Workflow vs. BPM – Workflow contains a number of entities in a unidirectional path
with nodes. Each of these nodes may contain a number of elements – material, data,
attributes, value. They come together for integration or even for division and will have
transformation going on. The activities that make these transformations are the sub
processes. So, there are changes taking place along the path and at the end we have a
completed process. Every detail has been worked out, the outcomes verified and corrected
brought into the flow so that nothing untoward occurs. The only thing lacking is flexibility
that business situations demand all the time and because the enterprise has to perform and
excel in conditions of uncertainty, improvement and competition. Fortunately these are
exceptions. Exceptions create new processes, opportunities and help us get new insights
into the processes. It has been found that 80% of process costs arise out of managing
exceptions. These happen at many points in the value chain. Managing these is Business
Process Management. Workflow does not offer options in the way processes are conducted.
They have fixed routes, activities and schedules. Actually, there is not much ‘management’.
BPM goes ahead not on a fixed track, but on bumpy roads, swerving sharply to avoid
collisions and overtaking the vehicles that are ahead. It calls for all management skills.

Project – A Project is a temporary endeavor with a finite completion date undertaken to

create a unique product or service. Projects bring form or function to ideas or needs.
A project is a set of activities which are networked in order and aimed towards achieving the
goals of a project. A project is undertaken to achieve a purpose.
Management – Management is the technique of understanding the problems, needs and
controlling the use of resources, such as cost, time, manpower, materials, etc.
Project Cycle - A project cycle basically consists of the various activities of operations,
resources and the limitations imposed on them.
Process - A process is part of the project which consists of simple and routine instructions
to achieve a desired result of any activity of the project. A process is responsible to bring
about the changes in the input fed to the process and gives out desired outputs as results of
the process.
Resource - It refers to manpower, machinery, money and materials required in the project.
Scope - It refers to the various parameters that affect the project in its planning,
formulation and executions.
Project Cost - It is the budgeted expenditure of the project.

Need for project management

Project management is necessary because –
a) a project requires huge investments which should not go waste
b) a loss in any project would have direct or indirect impact on the society
c) prevent failures in projects
d) scope of the project activity may undergo a change
e) technology used may change during the course of project execution
f) consequences of negativity in project related problems could be very serious
g) changes in economic conditions may affect a project

Q.6. What is JIT? Explain Value engineering with examples.

Ans. JIT can be considered to be a philosophy of manufacturing founded on the principles of
elimination of all waste and thereby increasing productivity. When the philosophy is applied
at workplace, the approach results in providing parts in just right quantities at the right
time. This results in economy of material and time thus lowering the costs and increasing
productivity. Since no extra parts are available, production of only good parts is forced on
the system. JIT has been extended to mean continuous improvement. These principles are
being applied to engineering, purchasing, accounting and data processing also. One of the
main challenges for JIT is frequent changes in production schedules owing to the changes in
demand. This causes the procurements plans to change. Communication right through the
supply chain helps in reducing inventories and keeps the flow lines smooth. Success of JIT
depends upon a lot of preparation and committed implementation.
Value Engineering / Value Analysis - Basically it is a methodology by which we try to
find substitutes for a product or an operation. It can be conducted both internally and
externally. The concept took shape during the Second World War. The thinking process calls
for a deep study of a product – the purpose for which it is used, the raw materials used, the
processes of transformation, the equipment needed etc. and question whether what is being
used is the most appropriate and economical. This applies to all aspects of the product.
For ex, Consider a component needs a round brass rod as raw material in size 21.5 mm.
diameter. It has seven operations – cutting, drilling, chamfering boring. Milling, plating and
polishing. Value analysis considers all aspects of each of these and investigates whether any
of them can substituted by another material, a different size, a different tool, a different
machine, a different cot sequence, a different tool for an operation, a different chemical, a
different concentration, a different voltage, shorter time or processing. Studies can be
conducted to verify whether any operation can be eliminated. Simplification of processes
reduces the cost of manufacture. Every piece of material and the process should add value
to the product so as to render the best performance. Thus there is an opportunity at every
stage of the manufacturing and delivery process to find alternatives which will increase the
functionality or reduce cost in terms of material, process and time. It has been found that
there will be an improvement in quality when systematic value engineering principles are
employed.
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